Download Study on the Core Competitiveness of Small and Medium-Sized Enterprises

ORIENT ACADEMIC FORUM
Study on the Core Competitiveness of Small and Medium-Sized
Enterprises
SI Jiangwei
School of Economics and Management of China University of Petroleum(East China),
P.R.China, 257061
[email protected]
Abstract: In the global financial crisis period, the ills of Chinese small and medium-sized enterprises
(SMEs) are exposed, and the important position and role of SMEs in the development of national
economy are also appeared. Based on the connotation of core competitiveness, this article analyzes the
current core competitiveness of SMEs, and finally puts forward the corresponding countermeasures.
Keywords: small and medium-sized enterprises, core competitiveness, corporate governance structure,
enterprise culture, marketing strategy
1 Introduction
By the end of September 2009, there are 10.3 million commerce register enterprises (excluding 31.3
million individual businesses). According to the current criteria, there are 10.231 million SMEs. More
than 99% of the total enterprises are SMEs. At present, the final products and service value of SMEs
account for 60% of GDP, and the tax revenue of SMEs account for 50% of State tax revenue. SMEs
offer nearly 80% of urban jobs. Chinese SMEs are expanding and have become the major force of
national economy and social development. SMEs play a more and more important role in economic
prosperity, increasing employment, promoting innovation, improving people's livelihood and so on.
In the global financial crisis period, more and more SMEs were loss and shut down, and the economic
benefits of SMEs decreased greatly. Enterprise ills are exposed in comprehensive and high strength, for
example the corporate governance structure is imperfect, the management level is low, and the brand
effect does not exerted fully, all of the enterprise ills make quite a number of SMEs bog down. So how
to get out of the difficulty to have a place in the competitive market depend on the core competitiveness
of SMEs. Therefore, creating and strengthening the core competitiveness is the top priority of SMEs.
2 The Connotation of Core Competitiveness
The core competitiveness is also known as core competence or core expertise. The core competitiveness
can be traced back to the Labor theory of Adam Smith. But the real founders of the theory about core
competitiveness are American scholar Winfrey harald and British scholar hamel who first explicitly
propose the concept of core competitiveness in the book “The core competitiveness of the enterprise”
which is published in early 1990s. In this book, the core competitiveness is considered as “special skills
and techniques which can make enterprise bring benefits to customers”, “accumulating knowledge in the
interior of enterprise, especially the knowledge involving how to coordinate different production skills
and integrate various techniques”. Thereafter, theorists and business lift the climax of studying and
cultivating the core competitive and research core competence in different aspects.
At present, the connotation of core competitiveness is not very clear in domestic and international
academic circles. But it is clear that the core competitiveness is the ability which realizes the value of
customer demand significantly, which is more advanced than competitors, which is hard to imitate,
which follows and also breakthroughs the convention, and which makes the enterprise sustainable
develop [1]. The core competitiveness is not only lies in the key technical equipment or operating
mechanism, but also promote enterprise's various abilities through their organic integration. The core
competitiveness has beyond the products, services, and all the business units in enterprise interior. The
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enterprises competition is not only the market competition, but also comprehensive abilities.
3 The Current Situation of Core Competitiveness of SMEs
For a long time, under the background which enterprises attach too much importance to the short-term
economic benefits and ignore the training and ascend of the core competitiveness. Most enterprises are
lacking core competitiveness, especially SMEs. The core competitiveness level of SMEs is not high, and
it restricts the formation, development and promotion of enterprise competition ability and the
competitive advantage. The lack of the core competitiveness of SMEs is performing in the following:
3.1 The corporate governance structure don't regulate
The corporate governance structure is a kind of modern organization management system, and it is a
kind of scientific management mode. Enterprises should perfect the corporate governance structure to
enhance core competitiveness. How to deal with the relationship among owners, operators and
producers is the common problem that SMEs are facing in the production and business operation. Some
main performances are: they ignore the long-term strategic planning of enterprises, restrain the
enthusiasm and creativity of the first-line managers because the corporate governance structure of SMEs
is still the family-based management in a large part, and it is lack of reasonable incentive mechanism,
organization members' responsibility and initiative.
3.2 Lack of human resources
Human resource is the key factor of the formation and ascension of the enterprises' core competitiveness.
At present, the founders of SMEs are ordinary workers who are lack of education and industrial
management experience, and whose comprehensive quality is low. The comprehensive quality of
enterprises determines the employing values. Most of the management mode is family-based
management in the management of SMEs, this kind of management mode let excellent talents cannot
enter or cannot develop ability. And the lack of the introduction and development and incentive
mechanism of SMEs causes the loss and liquidity in internal competition and lead to the shortage of
talents.
3.3 Technology innovation ability is low
Technology innovation is the source of core competitive ability, and the technical innovation ability has
become the second factor of restricting the development of SMEs. On one hand, the technical
development of SMEs in China is still in the imitation stage. “Pursuing introduction, and ignoring
digestion” has not improve enterprise technology innovation ability, and has made SMEs loss
independent intellectual property. On the other hand, SMEs are not willing or inability to invest capital
in technological innovation. SMEs' business investment target is imitation innovation rather than the
technical innovation, and the aim has made enterprise loss technology innovation ability.
3.4 The construction of enterprise culture is lag
Enterprise culture is the most enduring strength in the growth of the company, which is filled in every
link and corner of enterprises. SMEs' cultural constructions are in the lower levels because of lacking
enterprise culture. There are three reasons. First, enterprises pay more attention to the external form of
enterprise culture than the connotation of enterprise culture. So it makes the employee can't realize the
spirit and values of enterprises, and restricts the forming of enterprise culture. Second, enterprise
cultures are lack of personality because of identical, and are lack of vitality because of bad fusion. Third,
enterprises pay much attention to utilitarianism. The enterprise culture construction equates to product
sales, so enterprise has not put in time and energy in the overall construction of enterprise culture in
order to perfecting enterprise culture system hardly.
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3.5 Lack of scientific marketing strategy
Marketing strategy is an important aspect of the core competitiveness. Marketing strategy is the
enterprise's overall development planning. SMEs are formulating their marketing strategy in the
increasingly competitive market environment. But overall, the strategy formulations of SMEs are lack of
scientific, the effect is not obvious. There are five main aspects. First, the knowledge of marketing
strategy is lack. Enterprises have a superficial understanding of the marketing strategy and think
marketing= advertising + promotion [2]. Second, the understanding of the market survey is lack. Third,
the awareness of the brand cultivation is lack. For example, product quality problems appeared many
times. Fourth, marketing mode is single. Fifth, enterprise does not pay attention to cultivate customer
loyalty.
4 The Countermeasures of Promoting SMEs' Core Competitiveness
4.1 Perfecting the corporate governance structure
The corporate governance structure and enterprises' core competitiveness is closely interlinked. The
perfecting corporate governance structure is beneficial to enhance core competitiveness and provides
security system for the cultivating and promotion of core competitiveness. Based on the existing
problems of corporate governance structure, we can perfect it from three aspects. First, enterprises
should get rid of family-based management, establish a management mechanism which suits SMEs'
market economy development. Second, enterprises should build suitable rules and regulations, explicit
boundaries and responsibility of each department. Third, enterprises should establish suitable incentive
mechanism to improve the enthusiasm and creativity of SMEs' staff.
4.2 Improving the level of human resources management
Human resource is the most important resource. The raising of management's level is the key of the
forming and ascension of core competitiveness. Based on the situation that human resource of SMEs is
scarce, enterprises should improve the level of human resources management in the following. First,
enterprises need scientific talent leading plan and standardized introduction program, not the program
which introducing talents without scientific analysis and standardized examination. Second, enterprises
should perfect post management. Enterprises should insist “post should match working, and people
should match post” to promote human resources optimization allocation [3]. Third, enterprises should
improve human resources development reasonable. As human resource is the most important resource in
the knowledge economic society, enterprises should improve human resources development to provide
basis for forming and improving the core competitive. Fourth, enterprises should retain employees.
Every employee is a main body to create enterprise value, so the flow of human resources will increase
the cost of production and operating activities, and reduce the level of competence [3]. Fifth, enterprises
should insist Human Resource Outsourcing strategies. Enterprises give non-core competitive
departments to other enterprises, and let enterprise's core personnel do the enterprise's core business.
4.3 Improving the technology innovation ability
Technological innovation is the source which provides modern enterprise sustained competitive, and the
core of the enterprise development strategy. Only by the technological innovation, can enterprises
improve the market competition and market share. SMEs should pay attention to the technological
innovation, establish and perfect the technological innovation system which guided by the market and
the combination of the production, study and research, explore the technological innovation mode
actively to form effective technology innovation mechanism. SMEs should establish special research
and development department, establish enterprise technology development center through introducing
and training high quality talents, increase the input in technology innovation, in order to enhance the
enterprise innovation ability. What is more, SMEs can use other ways to improve the technology
innovation ability, for example, customer participates in technological innovation and the product
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market success is the mark of technological innovation success. Therefore, customer participates in
technological innovation can make product and market demand consistent. Enterprise can establish
technical innovation coalition, and outsource the research and development of non-core technology
along with the fine market division, in order to make innovation coalition get a win-win situation.
4.4 Constructing characteristics of excellent enterprise culture
Enterprise culture is the soul of an enterprise, and is the source of the innovation and development.
Enterprise culture can promote enterprise's core competitiveness directly or indirectly. Francis, an
American scholar, said: “you can buy the time of a person, you can buy labor of a person, but you can't
buy enthusiasm, activeness and the pursuing a person to the career. And these can been got by corporate
culture. [4]” the understanding of enterprise culture connotation is the premise of enterprise culture.
Enterprise culture is the ideal faith, values and norms that enterprise employees has held engaging in
commodity production and operation. And enterprise culture is a kind of ideology that explicit in
enterprise style, implicit in the heart, apart from other companies, and take values as the core.
Enterprises can consider constructing the characteristic of excellent enterprise culture from the
following three aspects. First, construct personalized enterprise culture. The personalized enterprise
culture is different from the core values of other organizations in order to reflect this enterprise's vivid
images. Second, implement applicable enterprise culture theory. Enterprise culture which only
understood by staff can improve core competitiveness. Third, build a lasting and perfecting enterprise
culture system. The enterprise culture system is the powerful guarantee of improving core
competitiveness and the source of promoting enterprise image.
4.5 Formulating scientific marketing strategy
Enterprises, as the market main body, should formulate marketing strategy whose center is consumer in
order to get a place in the competitive market. So SMEs should break the traditional marketing mode,
realize the commitment to customers, satisfy customer's demand, and make the marketing strategy more
scientific. Firstly, enterprises should improve the understanding of the brand. Enterprises must create
famous brand, because brand is enterprise's enormous productive. Secondly, enterprises should design
their marketing strategy through in-depth market research. Position should be proper. And enterprises
should pay more attention to improve the quality and brand publicity to create basis for famous brand.
Then, enterprises should develop new mode of marketing such as network marketing and test marketing.
Enterprises do some product testing and some various specific investigations to get the target consumer's
acceptance about the design, the name, the price, and advertising of new product. And enterprises let
customers participate in the enterprise marketing, make the enterprise products consistent with the
market demand in order to create more enterprise benefit and enterprise value. Finally, enterprises
should pay more attention to the cultivating of customer loyalty. Enterprises should take the opportunity
that customers participate in product design and development to provide additional value, pay attention
to the methods which can solve customer questions, establish friendship or affection in order to improve
the core competitiveness.
5 Conclusion
The core competitiveness is the sources and foundation that enterprises can obtain sustainable
competitive capability and competitive advantage. SMEs have realized the importance and urgency of
improving the core competitiveness, facing the situation of the market competition. Only by developing
the core competitiveness from actual conditions according to the change of environment and market, can
enterprises get the indefectible position in the fierce competition.
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References
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China. Modern Economy: 2007, (12) (in Chinese)
[3]. Yu Huachun. The Situation and Countermeasures of Human Resources in Coal Enterprise .
Modern Commercial Industry: 2009, 21 (5) (in Chinese)
[4]. Wu Yingmei. The Construction and the Path of Ascension of the Core Competitiveness . Industrial
and Technological BBS: 2008, 7 (7) (in Chinese)
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